EUR/USD 1.0800 Support at Risk on Strong U.S. Non-Farm Payrolls (NFP)
- U.S. Non-Farm Payrolls (NFP) to Expand Sub-200K for Third-Straight Month.
- Unemployment Rate to Narrow to Annualized 5.0%- Lowest Since 2008.
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Trading the News: U.S. Non-Farm Payrolls
A 180K expansion in U.S. Non-Farm Payrolls (NFP) accompanied by a downtick in the unemployment rate may boost the appeal of the dollar and spark fresh monthly lows in EUR/USD as it fuels expectations for Fed rate-hike at the December 16 interest rate decision.
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Why Is This Event Important:
With Fed officials keeping the door open for a 2015 liftoff, a further improvement in the labor market may encourage central bank officials to adopt a more hawkish outlook for monetary policy as Chair Janet Yellen remains confident in achieving the central bank’s dual mandate for full-employment and price-stability.
Expectations: Bullish Argument/Scenario
|ISM Non-Manufacturing- Employment (OCT)||--||59.2|
|ADP Employment (OCT)||180K||182K|
|NFIB Small Business Optimism (SEP)||95.5||96.1|
Improved confidence paired with expectations for a stronger recovery may generate a meaningful pickup in job growth, and a strong NFP figure may spark a bullish reaction in the greenback as the economy approaches the ‘natural’ rate of unemployment.
Risk: Bearish Argument/Scenario
|Personal Spending (SEP)||0.2%||0.1%|
|Pending Home Sales (MoM) (SEP)||1.0%||-2.3%|
|Advance Retail Sales (MoM) (SEP)||0.2%||0.1%|
However, the ongoing weakness in private-sector consumption accompanied by the weakening outlook for global growth may push U.S. firms to scale back on hiring, and a dismal development may pave the way for a near-term correction in the dollar as the data drags on interest rate expectations.
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How To Trade This Event Risk(Video)
Bullish USD Trade: NFP Expands 180K or Greater, Jobless Rate Ticks Lower
- Need red, five-minute candle following the NFP print to consider a short trade on EUR/USD.
- If market reaction favors a bullish dollar trade, sell EUR/USD with two separate position.
- Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
- Move stop to entry on remaining position once initial target is hit; set reasonable limit.
Bearish USD Trade: U.S Job/Wage Growth Disappoints
- Need green, five-minute candle to favor a long EUR/USD trade.
- Implement same setup as the bullish dollar trade, just in reverse.
Potential Price Targets For The Release
Chart - Created Using FXCM Marketscope 2.0
- EUR/USD stands at risk of facing a further decline as it breaks down from the upward trend dating back to March low (1.0461), but a failed attempt to break/close below interim support may spur a near-term rebound especially as the Relative Strength Index (RSI) bounces back ahead of oversold territory.
- DailyFX Speculative Sentiment Index (SSI) shows the retail crowd remains net-long EUR/USD since November, but the ratio continues to push to new extremes as it climbs to +1.46, with 59% of traders long.
- Interim Resistance: 1.1760 (61.8% retracement) to 1.1810 (38.2% retracement)
- Interim Support: Interim Support: 1.0790 (50% expansion) to 1.0800 (23.6% expansion)
Impact that the U.S. Non-Farm Payrolls report has had on EUR/USD during the previous month
|Period||Data Released||Estimate||Actual||Pips Change||Pips Change|
|SEP 2015||10/02/2015 12:30 GMT||200K||142K||+153||+56|
September 2015 U.S. Non-Farm Payrolls
U.S. Non-Farm Payrolls (NFP) fell short of market expectations as the economy added 142K jobs in September following a revised 136K expansion the month prior. Nevertheless, the unemployment rate held steady at an annualized 5.1%, while the participation rate dropped to 62.4% from 62.6% during the same period as discouraged workers continued to leave the labor force. Moreover, the NFP report continued to highlight subdued wage growth in the U.S. as Average Hourly Earnings increased an annualized 2.2% amid forecasts for a 2.4% print. Even though the Federal Reserve keeps the door open for a 2015 rate-hike, a further slowdown in job/wage growth may push the central bank to further delay its normalization cycle as it dampens the outlook for growth and inflation. The greenback lost ground following the disappointing release, with EUR/USD surging above the 1.1300 handle, but the market reaction tapered off during the North American trade as the pair ended the day at 1.1205.
GBP/USD Major Breakdown Underway
NZD/USD Shorts at Risk Ahead of Jobs Data- 6640 Key Support
Forex Sentiment Points to USD Strength versus these Currencies
Retail FX Remains Net-Long EUR/USD Ahead of NFP- 1.0800 Key Support
--- Written by David Song, Currency Analyst and Shuyang Ren
To contact David, e-mail firstname.lastname@example.org. Follow me on Twitter at @DavidJSong.
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